I bought my 1st Subaru this past december ('12) with 220,000 miles. ($4300) I had it checked by my mechanic and didn't have any major problems, other than timing belt had no record of replacement. I had the timing belt and water pump replaced. ($1000) I changed the oil in late dec with no issues present. mid january I overheated. assuming I had just lost coolant, I refilled it and continued driving within a few days it happened again and I took it in to my mechanic who told me I had a leaky upper radiator hose. I replaced it that next weekend (3 days max) and after I was done replacing it checked my oil. I saw a green tint and a slime that I have since heard called a "milkshake". I grounded it and it has sat almost 2 months. I have endeavored to replace my head gaskets. I have removed everything above the engine block and removed the dual exhaust below. I drained my oil and it was terrible. it really did look exactly like a chocolate shake. I'm at a decision point and I'm looking for advice. I really can't back away from this car now, I have to much invested. I can either continue and replace the gaskets like originally planned, but I'm afraid I ruined my bearings due to the overheating with bad lubrication. or I could spend the $2000-$2500 to have my engine bored out and have the gaskets replaced or I could find an engine like this one 

 http://www.gearheadengines.com/CrateEngines for $3300 Any advice?

Generally speaking if it has been overheated twice I would not just do headgaskets. The lower end most likely has been compromised. You could cut apart your oil filter and look for evidence of bearing material.

 

If you can do your own work you could tear down the block and inspect the bearings, crank journals, cylinder walls, you may get away with a cheap rebuild.

 

If that is not something you want to do you could look for a used engine, you could get just a shortblock if your heads are good. Several people recommend to do headgaskets on any engine you buy used and of course water pump, timing idlers, tstat, etc.